Question

Purchases and Cash Payments Journals; Accounts Payable subsidiary and General Ledgers

West Texas Exploration Co. was established on October 15 to provide oil-drilling services. West Texas uses field equipment (rigs and pipe) and field supplies (drill bits and lubricants) in its operations. Transactions related to purchases and cash payments during the remainder of October are as follows:

Oct. 16.		Issued Check No. 1 in payment of rent for the remainder of October, $7,000.
16.		Purchased field equipment on account from Petro Services Inc., $32,600.
17.		Purchased field supplies on account from Midland Supply Co., $9,780.
18.		Issued Check No. 2 in payment of field supplies, $4,570, and office supplies, $650.
20.		Purchased office supplies on account from A-One Office Supply Co., $1,320.
		Post the journals to the accounts payable subsidiary ledger.
24.		Issued Check No. 3 to Petro Services Inc., in payment of October 16 invoice.
26.		Issued Check No. 4 to Midland Supply Co. in payment of October 17 invoice.
28.		Issued Check No. 5 to purchase land, $240,000.
28.		Purchased office supplies on account from A-One Office Supply Co., $3,670.
		Post the journals to the accounts payable subsidiary ledger.
30.		Purchased the following from Petro Services Inc. on account: field supplies, $25,300 and office equipment, $5,500.
30.		Issued Check No. 6 to A-One Office Supply Co. in payment of October 20 invoice.
30.		Purchased field supplies on account from Midland Supply Co., $12,450.
31.		Issued Check No. 7 in payment of salaries, $32,000.
31.		Rented building for one year in exchange for field equipment having a cost of $15,000.
		Post the journals to the accounts payable subsidiary ledger.

Required:

1. Journalize the transactions (in chronological order as presented in the data) for October. Use a purchases journal and a cash payments journal, and a two-column general journal. Use debit columns for Field Supplies, Office Supplies, and Other Accounts in the purchases journal. Refer to the following partial chart of accounts:

11	Cash	18	Office Equipment
14	Field Supplies	19	Land
15	Office Supplies	21	Accounts Payable
16	Prepaid Rent	61	Salary Expense
17	Field Equipment	71	Rent Expense

At the points indicated in the narrative of transactions, post to the following subsidiary accounts in the accounts payable ledger:

A-One Office Supply Co.

Midland Supply Co.

Petro Services Inc.

2. Post the individual entries in chronological order (Other Accounts columns of the purchases journal and the cash payments journal; both columns of the general journal) to the appropriate general ledger accounts.

3. Total each of the columns of the purchases journal and the cash payments journal, and post the appropriate totals to the general ledge in chronological order. However, if there is more than one entry on the same date, post from the purchases journal before posting from the cash payments journal.r.

If no other account is needed in the "Other Accounts Dr." column select "No Entry Required". For those boxes in which no entry is required, leave the box blank.

PURCHASES JOURNAL								PAGE 1
Date	Account Credited	Post. Ref.	Accounts Payable Cr.	Field Supplies Dr.	Office Supplies Dr.	Other Accounts Dr.	Post. Ref.	Amount
		✔
		✔
		✔
		✔
		✔
		✔

CASH PAYMENTS JOURNAL						PAGE 1
Date	Ck No.	Account Debited	Post Ref.	Other Accounts Dr.	Accounts Payable Dr.	Cash Cr.
			✔
			✔
			✔
		Total

JOURNAL				PAGE 1
Date	Description	Post. Ref.	Debit	Credit

ACCOUNTS PAYABLE SUBSIDIARY LEDGER
Date	Item	Post. Ref.	Debit	Credit	Balance
Account: A-One Office Supply Co.
Account: Midland Supply Co.
Account: Petro Services Inc.

(Because the problem does not include transactions related to cash receipts, the cash account in the ledger will have a credit balance.)

GENERAL LEDGER
					Balance
Date	Item	Post. Ref.	Debit	Credit	Dr	Cr
Account: Cash #11
Account: Field Supplies #14
Account: Office Supplies #15
Account: Prepaid Rent #16
Account: Field Equipment #17
Account: Office Equipment #18
Account: Land #19
Account: Accounts Payable #21
Account: Salary Expense #61
Account: Rent Expense #71

4. Sum the balances of the accounts payable creditor balances.

WEST TEXAS EXPLORATION CO. Accounts Payable Creditor Balances October 31
A-One Office Supply Co.	$
Midland Supply Co.
Petro Services Inc.
Total accounts payable	$

5. All are reasons why West Texas might consider using a subsidiary ledger for the field equipment EXCEPT:

Answer 1

DATE	TRANSACTIONS & ACCOUNTS	DEBIT	CREDIT
OCT 16	PREPAID RENT	7000
	CASH/BANK		7000
OCT16	EQUIPMENT	32600
	PETRO SERVICES INC.		32600
OCT 17	FIELD SUPPLIES	9780
	MIDLAND SUPPLIES		9780
OCT 18	OFFICE SUPPLIES	650
	FIELD SUPPLIES	4570
	CASH		5220
OCT 20	OFFICE SUPPLIES	1320
	A-ONE OFF. SUPPLIES CO.		1320
OCT 24	PETRO SERVICE INC.	32600
	CASH		32600
OCT 26	MIDLAND SUPPLY CO.	9780
	CASH		9780
OCT 28	LAND	240000
	CASH		240000
OCT 28	OFFICE SUPPLIES	3670
	A-ONE OFFICE SUPPLIES CO.		3670
OCT 30	FIELD SUPPLIES	25300
	OFFICE SUPPLIES	5500
	PETRO SERVICE INC.		30800
OCT 30	A-ONE OFFICE SUPPLIES CO.	1320
	CASH		1320
OCT 30	FIELD SUPPLIES	12450
	MIDLAND SUPPLY		12450
OCT 31	SALARIES	32000
	CASH		32000
OCT 31	FIELD EQUIPMENT	15000
	RENT FOR BUILDING		15000
OCT 31	RENT	7000
	PREPAID RENT		7000

PURCHASES JOURNAL								PAGE1
Date	Account             Credited	Post. Ref.	Accounts Payable Cr.	Field Supplies Dr.	Office Supplies Dr.	Other Accounts Dr.	Post. Ref.	Amount
OCT 16	PETRO SERVICES INC.	✔	PETRO SERVICES INC.			FIELD EQUIPMENT		32600
OCT 17	MIDLAND SUPPLIES CO.	✔	MIDLAND SUPPLIES CO.	✔				9780
OCT 18	CASH			4570	650			5220
OCT 20	A-ONE OFFICE SUPPLIES	✔	A- ONE OFFICE SUPPLIES		✔			1320
OCT 28	A-ONE OFFICE SUPPLIES	✔	A-ONE OFFICE SUPPLIES		✔			3670
OCT30	PETRO SERVICES INC	✔	PETRO SERVICES INC	✔				25300
OCT 30	PETRO SERVICES INC	✔	PETRO SERVICES INC			OFFICE EQUIPMENT		5500
OCT 30	MIDLAND SUPPLY CO	✔	MIDLAND SUPPLYCO.	✔				12450

CASH PAYMENTS JOURNAL
Date	Ck No.	Account Debited	Post Ref.	Other Accounts Dr.	Accounts Payable Dr.	Cash Cr
OCT 16	1	RENT				7000
OCT 18	2	FIELD SUPPLIES		OFFICE SUPPLIES		5220
OCT 24	3	PETRO SERVICES INC			PETRO SERVICES INC	32600
OCT 26	4	MIDLAND CO.			MIDLAND CO.	9780
OCT 28	5	LAND				240000
OCT 30	6	A-ONE OFFICE SUPPLIES CO.			A-ONE OFFICE SUPPLIES CO.	1320
OCT 31	7	SALARIES				32000
		TOTAL

ACCOUNTS PAYABLE SUBSIDIARY LEDGER
DATE	ITEM	POST REF	DEBIT	CREDIT	BALANCE
Account: A-One Office Supply Co.
OCT 20	OFFICE SUPPLIES			1320	1320 CR.
OCT 28	OFFICE SUPPLIES			3670
OCT 30		#CK 6	1320		3670 CR.
MIDLAND SUPPLY CO
OCT 17	FIELD SUPPLIES			9780	9780 CR.
OCT 26		#CK 4	9780		NIL
OCT 30	FIELD SUPPLIES			12450	12450 CR.
PETRO SERVICES INC.
OCT 16	FIELD EQUIPMENT			32600	32600 CR.
OCT 24		#CK 3	32600		NIL
OCT 30	FIELD SUPPLIES			25300
OCT 30	OFFICE SUPPLIES			5500	30800 CR.